By Derek Reveron
December 2000 - Spanish-language Web sites are among the dot-coms hit hard by depressed stock prices, scarcer venture capital, and a shakeout in online advertising.
The Internet industry has struggled mightily since the Nasdaq nosedived in April. Some businesses will merge or be acquired, others will fail, and a handful will become profitable, analysts say. "What you are seeing is a shakedown of the second- and third-tier portals that, in the past, were getting advertising. Now the ad dollars are shifting to the premium names," says IDC analyst Mark Alexander.
Other analysts say the Spanish-speaking online market is overrun with companies -- New York-based StarMedia Network, Miami Beach-based Yupi Internet and Patagon.com, Spain's Terra Networks, Fort Lauderdale-based AOL Latin America, Argentina's El Sitio, and Universo Online, the biggest Internet access and content provider in Latin America. The survivors are likely to be those companies with the deepest pockets, such as Terra, a division of the Spanish phone conglomerate Telefonica.
William Landers, director of Latin America for Credit Suisse Boston, recently told a gathering of Latin American Internet entrepreneurs and executives in Miami: "Latin America's biggest Internet companies, like StarMedia, El Sitio, and Terra, have performed worse than the Nasdaq average since April. Still, these companies are young and still developing their business models, and are all very solid and have tremendous upside potential."
Hardly a week goes by without news of another dot-com's stock hitting an all-time low. Spanish-language Web companies are responding to the market turmoil by cutting costs and redoubling efforts to become profitable. For example:
-- In September, StarMedia Network laid off 125 people, or 15 percent of the company's staff (see Interactive, page XX). The move came after the company acquired 10 online businesses during the prior 12 months. StarMedia said the layoffs would save $15 million to $20 million in 2001 and help the company become profitable by the fourth quarter of 2001, a year earlier than previous projections.
-- SportsYA! announced in October that it raised $10 million in additional financing and would lay off 25 percent of its approximately 200 employees. "The cost reductions we have undertaken show how committed we are to getting to a point of profitability," says Emilio Romano, president and CEO of SportsYA!
-- In May, Arizona-based Quepasa.com announced a cost-reduction program aimed at cutting the company's 90-person work force by about one-third.
-- Yupi.com postponed its $172.5 million IPO after the Nasdaq crashed just a few days before the scheduled offering. As part of what Yupi called a restructuring, the company laid off 12 of its 260 employees and later hired 24 staffers. Yupi still hopes to go public, says CEO Oscar Coen, but he isn't sure when.
-- America Online Latin America postponed its IPO and cut its offering price nearly in half before finally going public in August.
An upheaval in online advertising has ravaged dot-comland. Before the April Nasdaq crash, Web companies accounted for most online ad buys. Afterward, venture capital dried up and sites cut their advertising budgets, thereby depriving other dot-coms of revenue. In August, for the first time all year, ad spending on the Internet dropped from the previous month, according to AdZone Interactive, which tracks Web advertising. The value of online ads in August was $1.4 billion, down from a yearly high of $1.5 billion in July, AdZone reported.
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